2005 (8) TMI 299 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of income of Rs. 2 lakhs.
2. Consideration of Rs. 2 lakhs and kist interest as part of abkari income.
3. Jurisdiction and validity of the Assessing Officer's rectification under section 154.

Issue-wise Detailed Analysis:

1. Inclusion of Income of Rs. 2 Lakhs:

The assessee firm, engaged in the arrack business, filed its original return declaring a loss of Rs. 2,266. The Assessing Officer (AO) computed the income under section 44AC based on purchases, which the assessee contested. The AO also added Rs. 2 lakhs as unexplained cash credit under section 68, a decision agreed upon by the assessee's representative. The CIT(A) upheld the AO's action, and the Tribunal directed the AO to compute the profit as per sections 28 to 43C. In the reassessment, the AO did not include the Rs. 2 lakhs addition, which was later rectified under section 154. The Tribunal found that the original assessment's addition under section 68 was not challenged and upheld the CIT(A)'s decision, confirming the AO's rectification.

2. Consideration of Rs. 2 Lakhs and Kist Interest as Part of Abkari Income:

The assessee argued that the Rs. 2 lakhs and kist interest were part of the abkari income and should not be independently assessed. The Tribunal clarified that the issue before it was limited to the computation of income under section 44AC and not the addition under section 68. The Tribunal noted that section 68 is independent of sections 28 to 43C and upheld the CIT(A)'s observation that the ITAT's directions only covered the business income computation under section 143(3). The Tribunal dismissed the assessee's contention, confirming that the addition under section 68 was justified and not part of the business income computation.

3. Jurisdiction and Validity of the Assessing Officer's Rectification under Section 154:

The assessee challenged the AO's jurisdiction to rectify the order under section 154, arguing that it was not a mistake apparent from the record. The Tribunal examined whether the AO's rectification was justified. It noted that the original addition under section 68 was agreed upon and not disputed. The Tribunal stated that a mistake apparent from the record is rectifiable under section 154, emphasizing that the mistake must be obvious and not dependent on elaborate arguments. The Tribunal found no infirmity in the AO's action and upheld the CIT(A)'s decision, confirming the AO's jurisdiction to rectify the order under section 154.

Conclusion:

The Tribunal dismissed the assessee's appeal, confirming the inclusion of Rs. 2 lakhs as unexplained cash credit, rejecting the argument that it was part of the abkari income, and upholding the AO's jurisdiction to rectify the order under section 154. The Tribunal emphasized that the original assessment's addition under section 68 was not challenged and was independent of the business income computation under sections 28 to 43C.